How Much "Effort" is Enough???

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Best Efforts…Reasonable Best Efforts… Diligent Efforts….Good Faith Efforts….Commercially Reasonable Efforts….terms we have all seen in contracts and other agreements used to establish standards of performance for situations where a party has agreed to accomplish something that it may not be able to achieve. However, the meaning of each of these clauses may not always be fully appreciated and the consequences of the "effort" required may come back to haunt us if its meaning is not completely understood.

In the recent case of Maestro West Chelsea SPE v. Pradera Realty, Inc, the court denied the defendant’s motion to dismiss a breach of contract claim, rejecting, among other things, the defendant’s claim that the contract was void for vagueness. Pradera argued that its agreement with Maestro to sell to Maestro its air rights, which was contingent on Pradera using its "best efforts" to a obtain a waiver and subordination from its mortgage lender, was void for vagueness since the contract’s "best efforts" clause did not contain objective criteria or guidelines which the defendant’s efforts could be measured against. Recognizing that New York law concerning "efforts" standards was unclear, the court found, however, that it was clear that the measuring criteria need not be defined in the contract itself, but instead, the court must interpret "best efforts" clauses the same way it interprets other contract provisions, and determine the intent of the parties at the time of the contract.

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Topics:  Best Efforts Clauses, Breach of Contract, Intent of the Parties, Reasonable Person Test

Published In: General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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